Low recovery rates set for Ferretti LCDS

At an auction held today, data vendor Markit and broker Creditex determined a final settlement value of 10.875% for loan-only credit default swaps (LCDS) referencing Italian luxury yacht manufacturer Ferretti, meaning protection sellers would need to pay protection buyers who opted for cash settlement 89.125% of the par value of the LCDS contracts.

Because the auction procedure is not hardwired in the standard CDS contract, protocols are required to cash settle CDS and LCDS trades. The company breached its loan agreements with the Royal Bank of Scotland, triggering a credit event.

High-frequency traders have been viewed with suspicion for some time. Now critics claim exchanges are conspiring with the traders to develop tools that benefit them and disadvantage ordinary investo...

This white paper looks at the Basel Committee's BCBS239 principles, also known as PERDARR (Principles for Effective Risk Data Aggregation and Risk Reporting), which comes into force from 1 January 2016.